The U.S. economy grew at a healthy 4.1% annual rate in the third quarter, stronger than previously estimated, as new data showed consumer spending accelerated in the summer.
The Commerce Department previously pegged the annual rate of growth at 3.6% in July through September. Friday's new estimate showed gross domestic product, the sum of all goods and services produced in the economy, expanded at the fastest pace since the fourth quarter of 2011 and the second-fastest since the recovery began in mid-2009.
Economists surveyed by Dow Jones had forecast a revised third-quarter growth pace of 3.6%.
The higher estimate was driven largely by a revision in consumer spending, which Commerce now says grew at a 2% annual rate in the summer instead of the previously estimated 1.4%. The revision, now showing a slight pickup from the second quarter, reflected higher household spending across the board. Households stepped up purchases of big-ticket items such as refrigerators, daily items such as gasoline and on services, including healthcare.
The latest data shows growth in the quarter was driven by more than just a buildup in businesses' inventories.
A measure of business spending, nonresidential fixed investment, rose at a 4.8% annual rate last quarter instead of the earlier estimate of 3.5%. The revision was largely driven by a higher estimate of business spending on software.
Export growth was also revised higher, showing a 3.9% annual rate of growth instead of 3.7%.
The report is the latest to suggest the economy gained speed in the second half of the year, boosting expectations for stronger growth in 2014.
The forecasting firm Macroeconomic Advisers expects GDP growth to clock in at 2.2% in the current quarter. At that pace, growth in the second half of 2013 would average an annual rate of slightly above 3%, higher than the average rate of 1.8% in the first half. GDP grew by 2.8% in 2012 and by 1.8% in 2011, an overall sluggish pace that has kept unemployment historically high more than four years after the recession.
The question now is whether the economy is genuinely lifting off, heading into a healthier cycle in which job growth fuels stronger spending by consumers and businesses--and in turn more job growth. Previous bursts of strength during the recovery quickly evaporated, with the economy reverting back to subpar growth.
